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April 30, 2014

Couples Share the Checkbook, but Men Rule the Portfolio

Whoever’s in charge of investing decisions, few want the job, UBS survey finds

A report released Tuesday by UBS drew a line between “financial decisions” and “investing” and found gender is a major factor in how those different responsibilities are handled by couples. UBS examined 10 core financial decisions, from day-to-day expenses to charitable donations, to see how couples manage their household wealth.

Some responsibilities are shared. Respondents said decisions about real estate and large purchases, estate planning and college planning are made equally by both partners. Additionally, men are just as likely to pay bills as women. However, half of respondents said investing decisions were made by the male partner. Just 37% of respondents said it was a shared responsibility.

That applies to younger women as well. Just 15% of millennial and 18% of Gen X women said they took the lead in making investment decisions.

UBS surveyed nearly 2,600 U.S. investors who were married or living with a significant other for the report.

Interestingly, neither men nor women particularly enjoy being the primary decision maker, the report found. Jeff Scott, head of market research for UBS, said there are a couple of reasons for that.

First, he told ThinkAdvisor on Wednesday, is that “investing has gotten harder over the years. People have recognized after the financial crisis five years ago that with globalization, something that happens on the other side of the globe can have a huge impact on investments here. Investors are much more skeptical about long-term investing than they were prior to the crisis, and they feel they have to more actively manage their investments.”

The second factor, he said, pertains to couples trying to manage investing on their own. “If you’re doing it on your own, you may be following your viewpoint, but you’re not sure if you’re covering what your partner would like to do. If only one person is engaged in investment decisions, they tend to — particularly if it’s the man — they tend to default to using their risk tolerance.”

The survey found that tendency to default to one person’s risk tolerance is less satisfying to both halves of a couple, Scott said, than if they found a way to compromise. However, reconciling their clients’ risk tolerance might be difficult even if they’re both engaged in investing. The report found women were significantly more conservative and were holding more cash than men. Half of respondents said they had a different risk tolerance than their partner.

Interestingly, 16% of couples keep separate accounts so they can make decisions independently of each other. These couples were the most likely to have disagreements about money.

“That kind of goes to [how] if you separate accounts and do things on your own, you might avoid having to work through it, but it seems it eventually leads to more arguments. Perhaps one person’s a saver and the other’s a spender, and you wind up feeling like, ‘Why aren’t you doing this or that?’”

Another pressing problem is that even when clients are satisfied with the man making financial decisions for the couple, that often doesn’t last through retirement. Women who are part of a couple where the man makes most of the decisions were less likely to say they felt excellent or very good about their overall financial situation after they retired (57%) than before retirement (63%). They were also less likely to report those levels of optimism post-retirement than women in any other kind of couple. Women in couples that share decision making were most likely to report feeling positive about their situation post-retirement (71%).

UBS found an interesting dynamic in woman-led couples. Only 16% of couples reported decisions were made primarily by the woman in the couple, but of those, only 34% of women are also the primary breadwinner.

“Those women are more likely to be the primary breadwinner than women in other couples,” Scott said, “but they’re not the majority in those couples. I think that’s just part of the reality that on average, women still aren’t making as much as men.”

Scott said that satisfaction levels in woman-led couples came as a surprise. “You might have thought that women in that position, where they’re taking the lead role, would be more satisfied. Actually we found that not to be the case. Basically it seems like these women really have a large burden on them because in most cases they’re still handling most of the household chore-type tasks.”

Women in those couples tended to be more aggressive in their investing style than other women. They were also more likely to use an advisor as a sounding board than other women, although the survey found most women who work with an advisor, regardless of the kind of couple they are in, follow the course recommended by the advisor.

These results focus mostly on male-female couples, but the report did offer some insight into how LGBT couples approach financial decisions. Just 3% of respondents identified as LGBT.

LGBT couples were more likely than heterosexual couples to keep separate accounts and make decisions independently of their partner. They also tended to be more aggressive in their risk tolerance.

They also reported being more optimistic about their finances than heterosexual couples, and significantly more optimistic about their ability to reach their goals.

Although LGBT couples were more likely to make financial decisions separately, they were more likely to share decision making responsibilities regarding investing specifically. UBS found almost two thirds of LGBT couples made decisions about buying or selling investments, compared with 39% of other couples. They’re also more likely than heterosexual couples to say that they’ve become more involved with managing investments since the financial crisis: 54% say so, compared with 41% of other couples.

“One major factor there was the undoing of the Defense of Marriage Act,” Scott said. It had such “an emotional and a financial impact for this group, that it had an impact on feeling better about their finances and that they’d be able to reach their goals.”